Last Updated on: 15th February 2025, 07:38 am
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1. P sends out goods costing Rs.3, 00,000 to Y at cost + 25%, consignor’s expenses Rs.5, 000. 1/10th of goods were lost in transit. Insurance claim received Rs.3, 000. The net loss on account of abnormal loss is:
(a) Rs.27,500
(b) Rs.25,500
(c) Rs.30,500
(d) Rs.38,000
The abnormal loss is {(3,00,000+5,000) x 1/10} – 3000 = 30500 – 3000 = 27500. Hence option (a) is correct
2. X sends out goods costing Rs.2, 00,000 to Y. 3/5th of the goods were sold by consignee for Rs.1, 40,000. Commission is 2% on sales + 20% of goods sold exceeding cost price. The amount of commission will be:
(a) Rs.5,667
(b) Rs.6,800
(c) Rs.6,000
(d) Rs.5,600
Value of 3/5 th goods sold = 3/5 x2,00,000 = 1,20,000. Extra price received (profit) = 1,40,000 – 120000=20000. Commisssion = 2% of 1,40,000 + 20% of (20,000) = 2800+ 4000= 6800
Hence option (b) is correct
3. A proforma invoice is sent by:
(a) Consignee to consignor
(b) Consignor to consignee
(c) Debtors to consignee
(d) Debtors to consignor
Intent: To test the understanding of who sends a proforma invoice in a consignment transaction.
Options Analysis:
(a) Consignee to consignor Incorrect. The consignee does not issue a proforma invoice; they only receive goods for sale.
(b) Consignor to consignee Correct. The consignor sends a proforma invoice to inform the consignee of the shipment details.
(c) Debtors to consignee Incorrect. Debtors do not issue invoices; they are customers who purchase from the consignee.
(d) Debtors to consignor Incorrect. The consignor has no direct dealing with debtors.
Correct Answer: (b) A proforma invoice is a document sent by the consignor to the consignee for informational purposes.
A pro-forma invoice is sent by consignor to consignee giving description and value of goods sent.
Hence option (b) is correct.
4. P sold goods to Q on consignment. Q sold the goods to R. R sold the goods to S. Who is the debtor in the books of P :
(a) Q
(b) R
(c) S
(d) all of Q, R & S.
Intent: To test the understanding of who sends a proforma invoice in a consignment transaction.
Options Analysis:
(a) Consignee to consignor Incorrect. The consignee does not issue a proforma invoice; they only receive goods for sale.
(b) Consignor to consignee Correct. The consignor sends a proforma invoice to inform the consignee of the shipment details.
(c) Debtors to consignee Incorrect. Debtors do not issue invoices; they are customers who purchase from the consignee.
(d) Debtors to consignor Incorrect. The consignor has no direct dealing with debtors.
Correct Answer: (b) A proforma invoice is a document sent by the consignor to the consignee for informational purposes.
Here Q is consignee. Actual customer of P is R whom the goods were sold by his consignee Q. S is customer of R, not of P. So, R is the debtor in the books of P. So, answer is (b).
5. Commission provided by the consignor to the consignee to cover bad debt is known as
(a) Ordinary commission
(b) Del credere Commission
(c) Over-riding commission
(d) Special commission.
Intent: To determine the type of commission that protects against bad debts.
Options Analysis:
(a) Ordinary commission Incorrect. This is a regular commission on sales, not for bad debt protection.
(b) Del credere commission Correct. This special commission compensates the consignee for assuming bad debt risk.
(c) Over-riding commission Incorrect. This is an extra commission for special efforts, not related to bad debts.
(d) Special commission Incorrect. This term is too broad and does not specifically mean protection against bad debts.
Correct Answer: (b) Del credere commission covers bad debts.
Del-credere commission is the commission which is provided by the consignor to the consignee to promote credit sales and which is allowed to cover loss of due to bad debts only. Hence option (b) is correct.
6. Over-riding commission is calculated on:
(a) Cash sales
(b) Credit sales only
(c) Sales at higher price
(d) Credit sales less cash sales.
Intent: To determine the basis for over-riding commission.
Options Analysis:
(a) Cash sales Incorrect. Over-riding commission is generally on credit sales.
(b) Credit sales only Correct. Over-riding commission is often given for achieving higher credit sales.
(c) Sales at a higher price Incorrect. Though incentives exist for selling at a higher price, this is not a direct basis for over-riding commission.
(d) Credit sales less cash sales Incorrect. Over-riding commission is not based on net credit sales but total credit sales.
Correct Answer: (b) Over-riding commission is based on credit sales.
Over-riding commission is an additional commission payable to consignee by consignor on total sales amount for making sales at above specific price or at above invoice price.
Hence option (c) is correct.
7. If the del credere commission is 10%, cash sales is Rs.5,000 and credit sales is Rs.10, 000. Calculate the amount of del credere commission.
(a) Rs.1,500
(b) Rs.1,000
(c) Rs.500
(d) None of the above.
Del-credere commission is calculated on total sales i.e. cash and credit sales (unless there is any agreement to pay on Credit sales only). So, the amount of del-credere commission = Rs.(10,000 +5,000) x 1/10 = Rs.1,500. Hence option (a) is correct
8. Del credere commission is allowed to cover-
(a) Normal loss
(b) Abnormal loss
(c) Loss due to bad debts
(d) All of the above
Intent: To understand the purpose of del credere commission.
Options Analysis:
(a) Normal loss Incorrect. This relates to wastage, not credit risk.
(b) Abnormal loss Incorrect. Abnormal loss refers to accidental losses, not bad debts.
(c) Loss due to bad debts Correct. Del credere commission is given to cover bad debts.
(d) All of the above Incorrect. Only bad debts are covered under del credere commission.
Correct Answer: (c) Del credere commission protects against bad debts.
Del-credere commission will save consignor from loss of bad debts . So, option (c) is correct.
9. X sent goods costing Rs 2,00,000 to his consignee Y, to be sold at 20% above cost. Y sold goods of Invoice value of Rs.1,20,000 on credit, and 30,000 in cash. Goods costing 12000 were destroyed in Fire. Y is entitled to Commission of 10% + 2% Del credere commission on sale. What would be commission payable to Y
(a) 18000 √
(b) 3600
(c) 24000
(d) 12000
Y will get commission of 10+2=12% on (1,20,000+30,000), i.e on 12% on 1,50,000 = 18,000. So, option (a) is correct.
MCQ Videos – Consignment Accounts Video #1 in English : 1-9
MCQ Videos – Consignment Accounts Video #1 in Hindi : 1-9
10. The unsold stock on consignment is valued at-
(a) Original cost of the goods
(b) Original cost + expenses incurred by both consignor and consignee
(c) Original cost + expenses incurred only by the consignee
(d) Original cost + all expenses incurred by consignor & consignee
Intent: To determine the correct valuation of consignment stock.
Options Analysis:
(a) Original cost of the goods Incorrect. Additional expenses incurred on stock must be considered.
(b) Original cost + expenses incurred by both consignor and consignee Correct. All necessary costs should be added to the original cost.
(c) Original cost + expenses incurred only by the consignee Incorrect. The consignors expenses are also included.
(d) Original cost + all expenses incurred by consignor & consignee Incorrect. Not all expenses are considered; only relevant ones are.
Correct Answer: (b) Unsold stock is valued at cost + necessary expenses by consignor & consignee.
The unsold stock on consignment is valued at Original cost + expenses incurred by both consignor and consignee. So, option (b) is correct.
11. Consignment Stock is valued
(a) Cost price
(b) Market price
(c) Selling price
(d) Cost or net realizable value, whichever is less.
Intent: To check understanding of correct stock valuation principles.
Options Analysis:
(a) Cost price Incorrect. This does not consider net realizable value.
(b) Market price Incorrect. Market price is not relevant unless it is lower than cost.
(c) Selling price Incorrect. Selling price does not determine valuation.
(d) Cost or net realizable value, whichever is less Correct. This is the accounting principle for stock valuation.
Correct Answer: (d) Consignment stock is valued at cost or net realizable value, whichever is lower.
Like Closing stock, the Stock with consignee is valued at cost or net realizable value whichever is less. So, option (d) is correct.
12. X sends out goods costing Rs.3, 00,000 to Y at cost + 20%. Consignor’s expenses Rs.6, 000. 10% of the goods were lost in transit. 2% of the goods evaporated (normal loss). Insurance claim received Rs.2, 000. The net loss on account of abnormal loss is:
(a) Rs.28,600
(b) Rs.26,600
(c) Rs.31,600
(d) Rs.27,000
Net abnormal loss = [{(3,00,000 + 6,000)} x 10 /100] – 2,000 = Rs.(3,06,000 x 10 /100) – 2,000 = Rs.30,600 – 2,000 = Rs.28,600. So, option (a) is correct.
(evaporation is normal loss, hence not counted)
13. Goods sent to consignment at cost + 33.33%. The percentage of loading on invoice price will be:
(a) 25%
(b) 33.33%
(c) 20%
(d) None of the above.
Goods sent on consignment = Cost + 33.33 % i.e. (100 + 33.33) % = 133.33 %. Invoice price 133.33 when cost price 100. Invoice price is 100, when cost price = 100 x 100/ 133.33 = 75 % (Cost price). So, the % of loading =(100 – 75)% = 25%. So, option (a) is correct.
14. Goods sent out on consignment Rs.7, 60,000. Opening consignment stock Rs.48, 000. Cash sales Rs.7, 50,000. Consignor’s expenses Rs.30, 000. Consignee’s expenses Rs.22, 000. Commission Rs.20,000. Closing consignment stock Rs.2, 70,000. The profit on consignment is:
(a) Rs.1,50,000
(b) Rs.1,40,000
(c) Rs.92,000
(d) None of the above.
Profit on consignment = (Sales + Closing stock) – (Goods sent out + Opening stock + Consignor’s expenses + Consignee’s expenses + Commission)
= Rs.(7,50,000 + 2,70,000) – Rs.(7,60,000 + 48,000 + 30,000 + 22,000 + 20,000)
= Rs.(10,20,000 – 8,80,000) = Rs.1,40,000. So, option (b) is correct.
15. X sends out 50 boxes to Y of Delhi costing Rs.200 / box. Consignor’s expenses
Rs.2, 000. Consignee’s expenses on selling Rs.1, 500. 3/5th of the goods sold by consignee, ½ of the balance goods were lost in consignee’s godown due to fire. The value of abnormal loss will be:
(a) Rs.2,700
(b) Rs.2,400
(c) Rs.4,200
(d) None of the above.
Total cost of goods = Rs.(50 boxes x Rs.200) + 2,000 = Rs.12,000
Cost of goods sold = Rs.12, 000 x (3 /5) = Rs.7, 200.
So, the value of abnormal loss (half the goods lost) = Rs. ½ x (12,000 – 7, 200) = Rs.2, 400.
So, option (b) is correct.
16. Goods costing Rs.2, 00,000 sent out to consignee at cost + 25%. Invoice value of the goods will be:
(a) Rs.2,50,000
(b) Rs.2,40,000
(c) Rs.3,00,000
(d) None of the above.
Invoice value of the goods = 2,00,000 + 25% of 2,00,000 = 2,00,000 + 50,000=.2, 50,000.
So, option (a) is correct.
17. Goods of the invoice value Rs.2, 50,000 sent out to consignee at 20% profit on cost. The loading amount will be:
(a) Rs.40,000
(b) Rs.48,000
(c) Rs.50,000
(d) None of the above.
The amount of loading Amount = Rs.2, 50,000 x 20 /100 = Rs.50, 000. So, option (c) is correct.
18. In the books of consignor, the profit of consignment will be transferred to:
(a) General Trading A/c
(b) General P/L A/c
(c) Drawings A/c
(d) None of the above.
Intent:
To identify the correct account where the profit from a consignment transaction is transferred in the consignors books.
Options Analysis:
(a) General Trading A/c Incorrect.
The trading account records the direct expenses and income from regular business operations. Consignment transactions are separate and do not affect the trading account.
(b) General P/L A/c Correct.
The profit from the consignment account is ultimately transferred to the General Profit & Loss Account, as it represents an income earned by the consignor.
(c) Drawings A/c Incorrect.
The drawings account is used to record withdrawals by the owner for personal use, which is unrelated to consignment profit.
(d) None of the above Incorrect.
Since option (b) correctly states that profit is transferred to the General P/L Account, this option is not valid.
In the books of consignor, the profit of consignment will be transferred to General P/L A/c. So, option (b) is correct.
MCQ Videos – Consignment Accounts Video #2: 2-18
19. Relation between Consignor and consignee is as a
(a) Master and servant
(b) Debtors and creditor
(c) Principal and agent
(d) Seller and buyer.
Intent: To test the nature of the legal relationship in a consignment agreement.
Options Analysis:
(a) Master and servant Incorrect. There is no employment relationship.
(b) Debtor and creditor Incorrect. The consignee does not owe money until goods are sold.
(c) Principal and Agent Correct. The consignee acts as an agent selling goods on behalf of the consignor.
(d) Seller and buyer Incorrect. The consignee does not purchase goods but sells them for the consignor.
Correct Answer: (c) The consignor and consignee have a principal-agent relationship.
Relationship between consignor and consignee is that of principal and agent. So, option (c) is correct.
20. Balance of consignment account shows
(a) Stock lying with consignee
(b) Profit and loss on consignment
(c) Amount due from consignee
(d) Amount due to consignee.
Intent: To determine what is represented in the consignment account balance.
Options Analysis:
(a) Stock lying with consignee Incorrect. Stock is recorded in a separate consignment stock account.
(b) Profit and loss on consignment Correct. The consignment account calculates profit or loss.
(c) Amount due from consignee Incorrect. This is recorded separately.
(d) Amount due to consignee Incorrect. The consignment account does not directly show this.
Correct Answer: (b) Consignment account balance reflects profit or loss.
The balance of consignment account shows profit and loss on consignment.
So, option (b) is correct.
21. Consignment stock A/c is a
(a) Representative personal A/c
(b) Real A/c
(c) Nominal A/c
(d) Personal A/c.
Intent: To test the classification of the consignment stock account in accounting.
Options Analysis:
(a) Representative personal account Incorrect. A representative personal account represents a person or group but does not apply here.
(b) Real account Correct. The consignment stock account represents an asset, making it a real account.
(c) Nominal account Incorrect. Nominal accounts deal with expenses, losses, income, and gains, not stock.
(d) Personal account Incorrect. A consignment stock account does not represent an individual or entity.
Correct Answer: (b) The consignment stock account is a real account.
Consignment stock A/c is a Representative personal A/c.
So, option (b) is correct.
22. Which of these accounts are opened in the books of consignee?
(a) Consignor A/c
(b) Goods sent on consignment A/c
(c) Consignee personal A/c
(d) Consignment A/c.
Intent: To check the correct account maintained by the consignee in consignment transactions.
Options Analysis:
(a) Consignor account Correct. The consignee opens an account for the consignor to track transactions.
(b) Goods sent on consignment account Incorrect. This account is maintained by the consignor.
(c) Consignee personal account Incorrect. The consignee does not maintain their own personal account.
(d) Consignment account Incorrect. This account is maintained by the consignor, not the consignee.
Correct Answer: (a) The consignee opens a consignor account
Consignor A/c is opened in the Books of Consignee.
So, option (a) is correct.
23. The balance of consignment stock lying with Consignee is shown at
(a) Assets side of balance sheet of Consignor
(b) Liability side of balance sheet of Consignee
(c) Asset side of balance sheet of Consignee
(d) As contingent assets in Financial Statement of Consignor
Options Analysis:
(a) Asset side of balance sheet of consignor Correct. The unsold consignment stock remains the property of the consignor.
(b) Liability side of balance sheet of consignee Incorrect. The consignee does not own the stock, so it is not a liability.
(c) Asset side of balance sheet of consignee Incorrect. The consignee does not show consignment stock as their asset.
(d) As contingent assets in the financial statement of consignor Incorrect. Contingent assets refer to uncertain future benefits, not consignment stock.
Correct Answer: (a) Consignment stock is shown as an asset in the balance sheet of the consignor.
The balance of consignment stock is called closing stock and like any other business it is current assets and shown assets side of Balance sheet.
So, option (a) is correct.
24. In case del credere commission is allowed to consignee, then the Consignee bears
(a) Bad debts
(b) Consignor’s expenses
(c) Consignee’s expenses
(d) All of the above.
Intent: To understand the effect of del credere commission on risk-sharing.
Options Analysis:
(a) Bad debts Correct. The consignee assumes the risk of bad debts when del credere commission is provided.
(b) Consignors expenses Incorrect. The consignor remains responsible for their own expenses.
(c) Consignees expenses Incorrect. The consignee already bears their usual expenses, regardless of del credere commission.
(d) All of the above Incorrect. Only bad debts are transferred to the consignee.
Correct Answer: (a) Del credere commission makes the consignee responsible for bad debts.
In case of del-credere commission, is allowed to consignee, then the loss of bad debts will be borne by consignee.
So, option (a) is correct.
25. Consignment Stock is valued at,
(a) Cost price
(b) Market price
(c) Selling price
(d) Cost or net realizable value, whichever is less.
Intent: To test knowledge of the correct valuation principle for consignment stock.
Options Analysis:
(a) Cost price Incorrect. This ignores the principle of conservatism.
(b) Market price Incorrect. Market price is not considered unless it is lower than cost.
(c) Selling price Incorrect. Selling price does not determine valuation.
(d) Cost or net realizable value, whichever is less Correct. This follows the conservative principle of valuation.
Correct Answer: (d) Consignment stock is valued at cost or net realizable value, whichever is lower.
Like Closing stock, the Stock with consignee is valued at cost or net realizable value whichever is less.
So, option (d) is correct.
26 If Del Credere commission is allowed for bad debt, consignee will debit the bad debt amount in his books in :
(a) Commission Earned Account
(b) Consignor Account
(c) Debtors Account
(d) General Trading Account
Intent: To check the correct accounting treatment of bad debts by the consignee.
Options Analysis:
(a) Commission Earned Account Correct. The consignee treats bad debts as a cost and deducts it from the commission earned.
(b) Consignor Account Incorrect. The consignee does not pass bad debts to the consignor if del credere commission is given.
(c) Debtors Account Incorrect. Writing off bad debts does not involve the debtors account directly in this context.
(d) General Trading Account Incorrect. Bad debts are not recorded in the trading account.
Correct Answer: (a) Bad debts are debited to the Commission Earned Account
In case of Del Credere Commission, Consignee is responsible for loss of Bad Debts. Bad Debts is loss of earnings from Commission. Bad Debts loss would be debited to Commission Earned Account.
So option (a) is correct.
27. The owner of the consignment stock is
(a) Consignor
(b) Consignee
(c) Debtors
(d) None
Intent: To clarify the ownership of consignment stock.
Options Analysis:
(a) Consignor Correct. The consignor retains ownership of the stock until it is sold.
(b) Consignee Incorrect. The consignee only holds the stock for sale and does not own it.
(c) Debtors Incorrect. Debtors are customers who purchase goods but do not own unsold stock.
(d) None **Incorrect.
Consignor is the owner of consignment stock, even if the stock is lying with consignee. Consignee is just an holding the stock as Agent, for purpose of sale on behalf of the consignor.
So, option (a) is correct.
